Warning: More Dumb Stuff Sighted Ahead! Organizations Should Stop Now or Change Course!

Have you ever seen a friend about to make a huge mistake but you cannot seem to find any way to stop them? That's how I feel about this time every year. I know calendar year-end companies are issuing their budget instructions and timelines. These will include submission dates and other requirements. For many companies, it is merely the prelude to the Annual Budgeting Dance.

Many field organizations will diligently plan their opening moves. What do they submit that is sufficiently credible to avoid outright rejection yet remain low enough to be easily reached?

Corporate is already planning its counternegotiation strategies to leverage the field up so that when the totals are all compiled the resulting sum will be sufficiently above whatever the magic number that is needed to please Wall Street.

The Annual Budgeting Dance is merely the ritual of getting to a set of mathematical relationships that match those numbers. It's a lot like musical chairs but not nearly as much fun. It explains why the budgeting process is filled with numerous iterations. Organizations typically take three or more iterations to get to a final budget (with the last one typically forced because there is no more time).

On the third iteration, the guy in the field in exasperation states, “Just tell me what you want the number to be. I am tried of guessing.” Corporate replies, “I can't tell you. It needs to be your number. You need to own it.” The field quickly lets him know, “It quit being my number two times ago.”

In many ways, this exchange explains why budgets destroy motivation and ultimately are disempowering. As David Cooke, CFO of Park Nicollet, described the challenges he faced when he eliminated budgets in 2005, he stated that managers had learned to use budgets as a crutch: “If the amount was in the budget, a manager concluded he had to do it. If it was not in the budget, he concluded that he could not possibly do it. Either way, he never had to make a decision on whether he should do it or not.”

This back-and-forth seems like so much dumb stuff I wonder why can't we get it right the first time. And why is the resulting output a set of crutches so that managers can avoid making decisions?

So again, why do we keep doing this dumb stuff???

If you feel like you are trapped into doing dumb stuff, add a comment or drop me an email. You can remain anonymous. We will discuss what finance can do to transform into a higher-value-added function where value is created. ###